State and partly-state owned companies distort competition ... · Distorted competition in the...

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Verein zur Förderung des Wettbewerbs und lauteren Verhaltens im Speditions-, Logistik- und Transportgewerbe e.V., Köln,

and

H.A.L.T.E., Honorable association de transporteurs et logisticiens européens, Paris

W H I T E PA P E R

2 0 0 4

State and partly-state owned companies

distort competition in the European freight

forwarding and logistics market

The consequences which threaten the existence

of privately financed companies

Distorted competition in the European freight forwarding and logistics market

Contents

1. Introduction 2

2. The threat to privately owned freight forwarding and logistics companies in Europe through partly-state owned and state owned companies 4

3. Examples for the trend towards monopolies in Europe 7

3.1 European mergers and acquisitions (M&As) in the forwarding and logistics sector from 1998 to 2002/2003 by partly-state owned and state owned companies 7

3.2 The example of ABX Logistics NV 9

3.3 The example of Deutsche Bahn AG 10

3.4 The example of Deutsche Post World Net AG 11

3.5 The example of La Poste SA 15

3.6 The example of SNCF SA 16

3.7 The example of TNT Post Groep NV 17

3.8 Cross-subsidisation and state support lead to distortion of competition – only a sluggish EU reaction 19

3.9 Finance requirement means more state funds expected 21

W H I T E PA P E R

State and partly-state owned companies distort competition in the European freight forwarding and logistics market

The consequences which threaten the existence of privately financed companies


4. The concentration process with examples of market leaders in Germany, France, Scandinavia and Benelux 22

4.1 The German forwarding and logistics market 22

4.2 The French forwarding and logistics market 22

4.3 The Benelux forwarding and logistics market 24

4.4 The Scandinavian forwarding and logistics market 25

4.4.1 Sweden 25

4.4.2 Finland 25

5. The consequences for the European economy from distorted competition in the forwarding and logistics market 26

6. Measures required to re-establish a situation with fair competition 28

7. Index of sources used 31

8. Imprint 37


1. Introduction

The goal of this white paper is to draw the attention of decision makersin politics and public administration in EU member states to the dramaticdistortion of the competitive situation in Europe’s forwarding and logisticsmarket caused by state-owned and partly-state owned companies. Itwill also explain the consequences of this distortion to companies in theprivate economic sector with statistics and facts.

Such a presentation was not in existence before. In view of the threateningsituation, the initiators of this white paper have decided to go public:This white paper will make Europe’s forwarding and logistics markettransparent, with the main focus on Germany and France, to show themarket power which partly-state owned and state owned companieshave already built up, for example through mergers and acquisitions. Itwill also show the danger this presents to private sector forwarding andlogistics providers, large, small and mid-size companies.

A first impression about the concentration process can be gained withthe following graphic:

The largest third party logistics providers (3PL) in Europe in 2002

2

Place Company 3PL turnover in billion euros

1 DPWN (Danzas)

2 Schenker

3 Exel

4 Geodis

5 Kühne & Nagel

6 DSV

7 TNT Logistics

8 Wincanton/P&O Trans European

9 Panalpina

10 Dachser0 1 2 3 4 5 6

Sour

ce:

Logi

stik

insi

de 1

6/20

03


In the business sector third party logistics companies provide logisticsservices for their customers using their own capacity and resources.Among the top 10 of this important sector (which comprises about80 percent of the turnover of logistics providers) are four partly-stateowned or entirely state owned companies: Deutsche Post World Net(DPWN) , Schenker, Geodis and TNT Logistics.

Market share in European land transport 2002

Even more serious is the market power clearly held by partly-stateowned or entirely state owned companies in European land transport –Even though this market appears different: Danzas belongs to DeutschePost World Net, Schenker to Deutsche Bahn AG, Geodis to the Frenchstate railways and ABX to the Belgian state railways.

The publishers of this white paper are not seeking to critically examine thecompetitive behaviour of large privately-financed transport and logisticscompanies such as UPS, Dachser or Kühne & Nagel. These companiesoperate, like small and mid-size firms in the sector, according to the rulesof the free market economy. They are also affected by the distortion tocompetition. It is also not the aim to complain about the existence ofpartly-state owned and state owned companies as such. This white paperis about the unfair competitive conditions which are to the advantageof those state owned companies created through non-permitted subsidiesand use of revenues from state-protected monopolies.

3

1 Danzas

2 Schenker

3 Geodis

4 ABX

5 DFDS Transport

6 Dachser

Place Company Market share in percent

Sour

ce:

Stin

nes,

Bay

ernL

B Re

sear

ch,

2003

0 0,5 1,0 1,5 2,0 2,5


A selection of partly-state owned and state owned European companiesare shown this white paper with their ownership and shareholdingstructures to make clear how advanced monopoly and market domina-tion already is.

Through a constructive list of measures/requirements listed in this whitepaper it aims to correct the distortions described and so protect privatelyowned companies – and the entire private sector – from the impactof distorted competition caused by subsidies and monopolies given topartly-state owned and state owned companies.

2. The threat to privately owned freight forwarding and logistics companies in Europe from partly-state owned and state owned companies

The partly-state owned and state owned companies in the forwardingand logistics sectors have for many years used their financial and politicaladvantages, not available in any way to private sector companies toaggressively

• Take over private sector competitors or logistics service providersused in the transport chain before or after their own market positionwith the goal of creating complete market cover at almost any price(predatory competition) and

• Gain market share so that existing or newly-acquired capacity isfully used even at the lowest prices (price dumping)

The partly-state owned and state owned companies, mainly railway andpostal service operators, have caused serious distortion to competitionby using state finance or revenues from state-protected monopoliessuch as letter deliveries.

4


Number of acquisitions of selected German companies in 2002

The rankings of most acquisitions are led by Stinnes AG, today part ofthe Deutsche Bahn group, Deutsche Bahn AG and Deutsche Post AG.

In Germany this mainly involves Deutsche Bahn AG and Deutsche PostWorld Net; in France SNCF AG and La Poste SA and in Belgium SNCBand its subsidiary ABX Logistics NV. In comparison to partly-state ownedand state owned companies, private sector firms must generate theirown finance in the market using their own performance. They cannotuse state-guaranteed sources of finance such as profits from state-protected monopolies and cross subsidies.

As already stressed, this affects not only small and mid-sized companiesbut also the large privately-financed corporations.

The very future of private sector forwarding and logistics companies inEurope is so in danger.

This dramatic transformation process running through the forwardingand logistics industry is without precedent. It requires rapid correctiveaction by the relevant political and administrative decision-makers on aEuropean and national level.

5

0

2

4

6

8

10

12

Sour

ce:

Erhe

bung

DZ

Bank

, 20

03

Number of acquisitions of selected companies

Thiel LogistikAG

RhenusAG

Stinnes AG

Deutsche Bahn AG

Deutsche Post AG

Development of acquisitions of selected European postal companies from 1998/1999 to 2001/2002

The largest European postal operators have already undertaken theirlargest acquisitions in past years.


6

10 15 20 25 30

Deutsche Post World Net 9

Sour

ce:

Erns

t &

You

ng E

urop

ean

Dea

l Sur

vey

2002

Number of acquisitions by selected companies

2001/2002 2000/2001 1999/2000 1998/1999

TNT Post Groep 6

Sweden Post 6

La Poste 2

0 5


3. Examples for the trend towards monopolies in Europe

3.1 European mergers and acquisitions (M&As) in the forwarding and logistics sector from 1998 to 2002/2003 by partly-state owned and state owned companies

In Europe today partly-state owned and state owned companies controlto a large extent the market for forwarding and logistics services becauseof the developments in recent years. The trend is speeding up: Againstthe background of increasing liberalisation of the postal and railwaymarkets these companies are expanding their international activitiesrapidly through takeovers, mergers and cooperation agreements.

The study “Ernst & Young – European Deal Survey 2002” speaks fun-damentally of an “all time high” in M&As in the logistics sector. In theperiod examined between September 2001 and August 2002 thenumber of M&As in Europe in this sector was at the high level of 354transactions (previous year-ago period 436 transactions). Especiallystrongly involved were the state-owned rail and post service operators(see previous graphic). Of the 354 transactions referred to, 50 transactionsinvolved state postal services. Of these, the Deutsche Post World Netwas involved in nine deals while six deals each involved the Dutch TNTPost Groep NV and the Norwegian postal service.

The study said a larger number of takeovers was expected in 2003.

This means a strong tendency towards monopolies in the Europeantransport and logistics sectors will continue to exist in the future. The studydid apparently not examine what the negative impacts would be of thisdevelopment. However, this white paper will outline them in detail.

This monopoly tendency is also illustrated by other sources. According tothe ”Top 100 in Logistics“, third edition, published by German specialistnewspaper DVZ Deutsche Logistik-Zeitung and logistics associationBundesvereinigung Logistik, in the three year period between the end

7


of 1999 and the start of 2003, almost 100 large mergers, acquisitionsand similar strategic activities involving over 50 million euros each oftransferred turnover took place in Europe’s transport and logistics sector.The total of the minimum transferred turnover reaches the enormoussum of at least 28 billion euros.

In a basically comparable three year time span between 1997 and 1999,about 26 billion euros of turnover was transferred, according to thesecond edition of the “Top 100 in Logistics”. This shows that mergeractivities have continued at a high level.

Calculations by the same study say that between 2000 and 2002/2003,the Deutsche Bahn’s cargo transport division took over transferredannual turnover of at least 8.41 billion euros, the Deutsche Post tookover at least 6.58 billion euros (so far as is known, partly realizedthrough previously acquired companies). These sums – which could beconsiderably higher because of the unknown turnover of some acquisi-tions – underline the increasing market power of the partly-state ownedand state owned companies.

With the following companies and the many acquisitions they havemade, the monopoly tendency and the associated market power isespecially clear:

• Belgian railway company SNCB and its internationally-active subsidiary ABX Logistics.

• Deutsche Bahn AG and its subsidiaries Stinnes and Schenker

• Deutsche Post World Net with numerous units including DHL and Danzas

• French postal service La Poste and its controlling shareholding in Germany’s DPD

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• French railways SNCF and its subsidiaries or shareholdings Sernam, Geodis and Calberson etc.

• Dutch postal service TNT Post Groep with its subsidiaries In-Night-Express (Previously NET-Nachtexpress and NVS), Schrader Group, Jet Service and Wilson Group

3.2 The example of ABX Logistics NV(Belgium, 100 percent subsidiary of Belgian railways SNCB)

ABX Logistics NV is a 100 percent subsidiary of Belgian railways SNCB NV.The company was established in 1993 and was at that time purelyresponsible for domestic Belgian cargo transport for SNCB. In 1998 itstarted an aggressive international expansion with extensive and multi-million acquisitions of international logistics service operators including

• Dubois (France) with about 3,500 personnel, about 518 millioneuros turnover, 95 branches (at the time of takeover in 1999)

• Saima Avandero (Italy) about 2,500 personnel, about 511 millioneuros turnover, 14 branches (at the time of takeover in 1998)

• Bahntrans (Germany) about 3,750 personnel, about 550 millioneuros turnover, 36 branches (at the time of takeover in 1998)

• Kersten Hunik Holding BV (Netherlands)

• Cors de Jongh BV (Netherlands)

• Bode Scholten Utrecht BV (Netherlands)

• WT Shipping (United Kingdom)

• Wegtransport (Netherlands), with four branches in the Netherlands.

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Goal was to build up a European network for groupage cargo. ABX’sfinancial development in recent years has shown that the company cannotoperate profitably. Press reports say the company alone in 2002 suffered anet loss of 254 million euros. Losses in 2003 according to preliminaryinformation will reach between 70 and 80 million euros on a turnover ofaround 2.5 billion euros. ABX has announced regularly that it will achieveprofits in the near future, but in fact only losses are reported.

The question so arises how such a loss-making company could haveundertaken the acquisitions listed adhering to the criteria that of theprivately financed transport and logistics sector is subjected to.

3.3 The example of Deutsche Bahn AG(Germany, 100 percent state-owned)

The transport and logistics sector of Deutsche Bahn currently sees itsmain task as globalisation through the integration of international partnercompanies in the European rail company Railion and expansion of itslogistics activities. This goal was massively moved forward in summer2001 by the takeover of the Stinnes concern for the unprecedented sumof around 2.5 billion euros. The group logistics company Schenker AGin 2001 achieved turnover of about 6.1 billion euros and employedabout 32,000 personnel.

Since September 2003, Stinnes has been the leader company in DeutscheBahn’s new corporate division Transport and Logistics. In this division theprevious Stinnes subsidiary Schenker and the Deutsche Bahn’s ownfreight activities have been combined. Stinnes plans targeted expansionof its presence in Europe, the USA and Asia. Necessary investment hasalready been approved by the owner Deutsche Bahn. In Europe thenetwork will be especially expanded in the Iberian Peninsular, the UnitedKingdom and East Europe. But it is still open whether this will be under-taken by opening more branches of group companies or by furthertakeovers of private logistics companies. Apparently further acquisitionsare planned worldwide.

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Methods of obtaining finance are highly questionable. Press reports saythe Deutsche Bahn group in 2002 made a loss of 454 million euros, in2003 it made a (preliminary) loss of 177 million euros. According to aGerman news magazine, Deutsche Bahn again has debts of 26 billioneuros only 10 years after its debts were removed in 1994 as part of railwayreform. Deutsche Bahn is also the largest receiver of state subsidies inthe transport sector. The German federal government has paid DeutscheBahn about 198 billion euros of support since 1994. Losses raise thequestion about how the group was able on the basis of its own operationsto raise finance for past and planned acquisitions.The strategy of expanding Deutsche Bahn’s freight transport activitiesby buying the transportation concern Stinnes/ Schenker will lead to anunavoidable intensification of competition with mid-size and smallprivate forwarders in the classic forwarding sector.

In comparison with other partly-state owned and state owned companiesthere is another strategy in this type of concentration. Deutsche Bahn isseeking to expand its position into market domination not by takingover a series of small companies but by the takeover of the logisticsgiant Stinnes. It should be pointed out that Stinnes had previously(in the early nineties) belonged to the former German state railwaysDeutsche Bundesbahn.

3.4 The example of Deutsche Post World Net AG(Germany, 50 percent in state ownership, 18.8 percent in ownershipof the federal industrial development Bank KfW*, rest freefloat) * (In turn 80 percent owned by German federal government, 20 percent by German state governments)

With the brands Deutsche Post, DHL, Danzas and Postbank, the grouphas expanded to become one of the largest logistics companies in theworld via a heavy use of finance including earnings from its nationalmonopoly on letter deliveries.

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Following is a selection of the group’s most important acquisitions andshareholdings:

• DHL International (globally active company), about 49,000 personnel,about 2.29 billion euros turnover (at the time of the original purchaseby Deutsche Post of a 22.5 percent shareholding in 1998)

• Danzas Holding AG (Switzerland), about 16,000 personnel, about3 billion euros with activities in 150 countries (at the time of takeover in 1998)

• Via Danzas: Danubiasped (Hungary)

• Via Danzas: Hammond International Ltd (New Zealand)

• Via Danzas: ASG AB (Sweden), about 9,500 personnel, 1.26 billioneuros turnover (at the time of takeover in 1999)

• Via Danzas: Koninklijke Nedlloyd Groep NV (Netherlands), about14,000 personnel, about 1.56 billion euros turnover (at the timeof takeover in 1998. The Nedlloyd ocean container shipping linewas not part of the deal.)

• Via Danzas: Nedlloyd Unitrans GmbH (Germany), about 2,700 per-sonnel, about 500 million euros turnover (at the time of takeover)

• Via Danzas: DDF Logistica (Brazil)

• Via Danzas: Star SA (France)

• Via Danzas: Meadowsfreight IRL Ltd (Ireland)

• Via Danzas: Scandinavian Garment Services (Denmark)

• Via Danzas: Universal Air (Sweden)

• Via Danzas: Cargo Partner Exhibition (Norway)

• Via Danzas: Swisscom Fixnet Logistics Segment (Switzerland)

• Global Mail Ltd. (USA)

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• Securicor PLC Distribution Division (United Kingdom)

• Ducros Services Rapides SA (France)

• MIT (Italy)

• ITG (Germany)

• Guipuzcoana (Spain)

• Cargoplan Spedition (Austria)

• Servisco (Poland)

DPWN turnover according to business sectors from 1997 to 2001

Within a period of only a few years, the Deutsche Post World Net(DPWN) has enormously expanded its business sectors logistics andexpress on the basis of surplus profits of its stagnant but protectedmonopoly on letter deliveries. The jump between 1999 and 2000 makesthe large acquisitions clear.

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DPWN turnover in million euros

Sour

ce:

ver.d

i, co

nfer

ence

on

post

and

lo

gist

ics

sect

or,

Stut

tgar

t 20

03

1997

10.788

1998 1999 2000 20010

5.000

10.000

15.000

20.000

25.000

30.000

35.000 Financial services in mln EURLogistics in mln EURExpress in mln EURPost in mln EUR

11.272 11.671 11.733 11.707

3.533 3.8184.775 6.022 6.421

4.450

8.289 9.1532.871

7.9907.604


Ebita* and turnover by DPAG business sector, 1st to 3rd quarter 2002

The postal sector remains the group’s dominant cash cow. This sectoris threatened with pressure from further liberalisation. Despite highturnover in other business sectors (see graphic above), their Ebita isrelative small.*) Ebita: Data/measurement to judge financial development

Press reports say many takeovers were made at “moon prices” to keepcompetitors away. The group’s financial power was and is generatedby the price for letters. Deutsche Post is protected from competitionfrom private competitors. Deutsche Post’s charge for letter deliverieswas described as “significantly over-priced” by a recent study by theBritish economic research institute NERA commissioned by the Germanassociation for post and telecommunications DVPT.

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0 2 4 6 8 10

Brief

Turnover Ebita

Express

Logistik

Finanzdienstleistung

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TPG

, Ba

yern

LB R

esea

rch,

200

3

DPWN: High proportion of earnings from post (9 M 02, in Bln euro)


3.5 The example of La Poste SA(France, 100 percent in state ownership)

The 100 percent state owned French national postal organisation hasdeveloped into one of the largest European postal organisations throughtakeovers including

• Germany’s DPD, about 21,500 personnel including subcontractors, about 1.7 billion euros turnover in 2002

• Further shareholdings in logistics-active companies in France including Colipost and Digipack

• Parcelline (United Kingdom)

To handle takeovers, the Holding Geopost was set up to combine theEuropean parcel activities.

In view of the complete opening of national postal services to competitionfrom 2009, the French government has allocated 1 billion euros over thenext seven years for the technical modernisation of the postal sector.Mail presently still contributes 60 percent of group turnover. The invest-ment is supposed to come from La Poste itself through higher debt.Currently losses in this business sector run to around 250 million eurosannually. It is therefore questioned how such an investment sum could begenerated under commercial principles. The danger is again created ofstate finance, because commercially-generated profits are not expected.But Geopost is working profitably. In the express sector acquisitions areagain likely, mainly in east European growth markets.

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3.6 The example of SNCF SA(France, 100 percent in state ownership)

The state-owned French railway company handles classic rail-based freighttransport services. Through its shareholdings it has become one of thelargest diversified European logistics concerns. Main shareholdings include

• Logistics service operator Geodis SA, about 17,000 personnel,about 3.5 billion euros turnover along with various subsidiaries

• Sernam SA, about 3,800 personnel, about 534 billion euros turnover (2001), handles groupage and express transport.

SNCF also has shareholdings in

• Combined transport operator Novatrans.

• Via Geodis SNCF also has shareholdings in

• Borghi Transporti (Italy)

• Züst Ambrosetti (Italy)

• Calberson (France)

• Bourgey-Montreuil (France)

• Tailleur (France)

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3.7 The example of TNT Post Groep NV(Netherlands, 43 percent state ownership)

The Dutch state has a 43 percent shareholding in TNT Post Groep (TPG)via the national postal service Royal PTT Post. The first privatisationstages took place in 1994 and 1996. In late 1996 it fully took over theglobally-active express service TNT.

Along with the original express and letter deliveries, TNT also offerscontract logistics services. The TPG group was created in 1998 whenthe Netherlands divided post and telecommunications services. Thegroup has a monopoly in the Netherlands for delivery of letters up to100 grammes. TPG pursues aggressively acquisitions to expand its sectorsmail, express and logistics, especially in Germany and the UnitedKingdom. However, its net debt currently stands at an enormous 1.5billion euros.

Turnover development of TPG’s business sectors 2000 to 2001

While the sectors mail and express are stagnating, TGP’s logistics activitieshave been strongly expanded through acquisitions.

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TPG – turnover development of business sectors

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ver.d

i con

fere

nce

post

and

logi

stic

sse

ctor

, St

uttg

art,

200

3

2000

3.706

4.145

2.179

2001

LogisticsExpressMail

3.896

4.139

3.125


TPG’s turnover and Ebita according to business sector, 1st to 3rd quarter 2002

The monopoly letter delivery sector is still TPG’s most profitable businesssector – despite higher turnover in other sectors generated by acquisitions.

Expansion in past years is only marginally due to organic growth. Most hasbeen achieved through acquisitions of logistics companies including

• Jet Services (Germany), about 400 personnel, about 86 million eurosturnover (at the time of takeover in 1999)

• Cargotech (Turkey)

• Lason UK Group (United Kingdom)

• Schrader Group (Germany)

• Barlatier (France)

• Convoi (Netherlands)

• In-Night-Express (formerly NET-Nachtexpress and NVS)

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0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50

Express

Brief

Logistik

Sour

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TPG

, Ba

yern

LB R

esea

rch,

200

3

Turnover and Ebita according to business sector (in bln euro)

Turnover Ebita


3.8 Cross-subsidisation and state financial aid lead to distortionof competition – only a sluggish EU reaction

The use of earnings from monopolies for cross-subsidisation plus use ofstate subsidies such as described in the examples of Deutsche Post WorldNet or ABX Logistics have led to massive distortions of competition to thedisadvantage of privately-owned forwarding and logistics companies.The EU Commission has only made a tentative reaction to non-permittedcross-subsidies and illegal subsidies such as in the cases of ABX andDeutsche Post World Net.In late July 2003 the EU Commission decided to investigate state subsidiesof 252 million euros given by state owned SNCB for the restructuring ofABX. This sum comprised a bridge loan of 140 million euros and theswitching of 112 million euros of debt into equity. This investigation wasstarted after pressure from the association for the promotion of faircompetition (Wettbewerbsverein).As soon as late August 2003 the EU concluded that this involvednon-permitted state subsidies, which would distort competition and givean unfair competitive advantage to ABX companies in Germany, Franceand the Netherlands. In a first step, the EU stopped further financialsupport from the parent company SNCB. The Commission is currentlyinvestigating financial support previously paid to by SNCB to ABX inGermany, France and the Netherlands.

In March 2001, Deutsche Post World Net had to pay a 24 million eurofine to the EU because for 26 years it had given large customers volumeand loyalty rebates to push private express parcel services out of themarket. The rebates were financed using profits from the letter deliverymonopoly. With this decision, the EU Commission was reacting to acomplaint from the express service UPS, which as long ago as 1994 hadcomplained to Brussels about Deutsche Post’s price dumping. The EUdescribed the rebates as ”misuse of a position of market domination.”

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In addition, the EU decided in July 2002 that the group must repay non-permitted subsidies totalling 572 million euros as between 1994 and1998 it had undertaken predatory pricing in parcels services, coveringlosses with profits from its state-protected monopoly on letter deliveries.EU research showed that “aggressive rebates” were used with the helpof cross subsidies to undermine private parcel delivery services. The“Wettbewerbsverein” (Association for the promotion of fair competition)was also involved in this process and provided the Commission withinformation to process the complaint.

A further point of concern is the personnel pensions provided byDeutsche Post World Net. Germany’s federal government is covering96 percent of the pension liabilities of the new companies set up toreplace the old post office government department. Investigations havebeen underway since 2001 into whether this involves unlawful subsidies.A programme of early retirement for personnel was paid for byGermany’s national social security system. While other companies mustpay for expensive compensation programmes to reduce personnelnumbers themselves, the federal budget is carrying the burden ofDeutsche Post’s personnel reduction. Previous plans to use profits fromthe Deutsche Post’s stock market floatation to reduce pension liabilitieswere abandoned because of the low share price.

Following a complaint, the EU Commission is currently examining financialhelp provided in 2001 by French state railways SNCF to its subsidiarySernam. This was sparked by a complaint by members of French groupagecargo companies in the organisation H.A.L.T.E. the Honorable associationde transporteurs et logisticiens européens. The 448 million euros providedwas linked to certain conditions. The EU Commission discovered thatthe payment range it had approved was exceeded by at least 42 millioneuros and started an investigation. Now the legality of the support andit’s use will also be investigated as there is doubt about this.

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3.9 Finance requirements means more state support expected

The finance required for expansion plans held by the many companiesdescribed means that payment is expected of more state support topartly-state owned and state owned companies. This will lead tocontinuation of competition distortion.

Competition associations believe that the trend to monopolisation willincrease in the approach of full or partial privatisation of state-ownedcompanies. The bigger and more successful the companies can bemade with the help of state subsidies/support or monopoly profits themore the same state will benefit through larger profits from sharesales. This means there is little hope national governments will takeaction on the problem.

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4. The concentration process with examplesof market leaders in Germany, France, Scandinavia and Benelux.

4.1 The German forwarding and logistics market

It is Deutsche Post World Net which with the help of profits from its lettersmonopoly has undertaken an unprecedented series of acquisitions,shareholding purchases and new company setups. A similar strategy canbe seen with the Deutsche Bahn. The takeover and cooperation activitiesof both companies have already been extensively described.

The combined turnover of the Deutsche Bahn, DB Cargo, Deutsche PostWorld Net/Frachtpost and Schenker according to The Top 100 in Logisticswas 6.996 billion euros in 1998. By 2001 it had risen to 9.829 billioneuros, an over-proportional rise. This increase, way above market average,was not achieved by organic growth and performance but largelythrough acquisitions. The concentration process at the top of the leaguetable has accelerated rapidly. Deutsche Post World Net and the freighttransport section of Deutsche Bahn head the turnover rankings by alarge margin.

A further analysis of the study confirms this concentration process.Turnover growth among the large state controlled trusts is substantiallylarger than with privately financed large or mid-size companies in thetransportation and logistics sector.

4.2 The French forwarding and logistics market

The logistics services market in France has been undergoing a turbulentprocess of restructuring and concentration in recent years, as is the casein other European countries.

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French state railways SNCF is also the main shareholder in the diversifiedlogistics group Geodis. Geodis has large numbers of shareholdingsincluding the leading international forwarder Calberson and is seekingto become one of the leading European logistic operators. So at thetime of publication of this white paper SNCF’s entire cargo sector is thebiggest player in the French forwarding and logistics market.

Another important player owned by the French state is the postal serviceLa Poste which through purchasing shareholdings in Germany’s DPDorganisation via the intermediate holding Geopost has bought its wayinto the European market for courier, express and parcel services.

The concentration process means that many market leaders in classicforwarding and logistic services, previously in private ownership, arenow increasingly controlled by partly-state owned or entirely stateowned groups. The Danzas group, which holds a strong position in theFrench international forwarding and consumer goods distributionmarkets, is part of the Deutsche Post group. The forwarding groupDubois (about 3,500 personnel, about 430 million euros turnover atthe time of takeover in 1999) belongs to ABX, in turn controlled byBelgian state railways (SNCB).

The study Top 100 in Logistics previously quoted also expects the turbu-lence caused by restructuring processes in the French logistics servicessector to continue for many years to come.

As in Germany, France’s market displays a concentration process towardspartly-state owned and state owned groups. This is made very clear bythe following overview:

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Comparison of ownership of the top 12 in France(partly-state owned and state owned companies in bold type)

1995 2001

This development shows that the share of partly-state owned or entirelystate owned companies among the top 12 has risen from 17 percentin 1995 to 58 percent in 2001.

4.3 The forwarding and logistics market in Benelux

The Benelux countries (Belgium, Luxembourg and the Netherlands) haveespecially large transport volumes in relation to their populations.By far the largest Benelux logistics company is the Dutch TPG group,created from the Dutch state postal organisation PTT and the formerAustralian group TNT. It has three business sectors: mail, express andlogistics. TPG has announced it plans to supplement its portfolio withforwarding companies, so further takeovers are strongly expected. Insecond place is Belgian state railways SNCB, which among others ownsABX Logistics.

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1 Geodis-Calberson (SNCF, France) SNCF (France)2 Danzas France (DANZAS, Switzerland) Dt. Post (Germany)3 Gefco (PSA Peugeot-Citroen, France) PSA (France)4 Mory (Novalliance, France) 90 Per cent Financegr. (UK)5 Sernam (SNCF, France) SNCF (France)6 Dubois (Dubois family, France) SNCB/ABX (Belgium)7 JET Services (Caille family) TPG/TNT (Netherlands)8 Heppner (Schmitt family, France) Schmitt family, (France)9 Ducros (Finanzgruppe Matignon, France) Dt. Post/Danzas (Germany)

10 Graveleau (Matignon finance group, France) Dachser (Germany)11 Joyau (Joyau family, France) DB AG/Schenker (Germany)12 Grimaud (Grimaud family, France) Ziegler (Belgium)


4.4 The forwarding and logistics market in Scandinavia

4.4.1 Sweden

In Sweden the concentration process in the forwarding and logisticsindustry is especially advanced. The two groups Deutsche Post WorldNet /DHL and the Deutsche Bahn subsidiary Schenker Stinnes Logisticshave according to a report in specialist newspaper DVZ a 70 percentmarket share. A major reason for this was the dismantling of forwardingcompany ASG, which via Danzas became part of DHL. Both are DeutschePost subsidiaries. The fundamental importance of truck transport hasincreased in recent years and the market is highly concentrated. Swedenis consequently an important market for Deutsche Post World Net,whose declared aim is to become the largest logistics service operatorin the Scandinavian countries.

4.4.2. Finland

Finland has the second highest transport intensity in Europe. The logisticservice operators with the highest turnover are Finnish railways VRCargo and the Finnish postal service.Finland Post Oy is 100 percent state-owned. In 2001, a 51 percent sharein its contract logistics business was sold to Danzas, which todaybelongs to Deutsche Post World Net.Finland Post has according to press reports raised its group turnover by3 percent in 2003 to 1.14 billion euros (operating profit rose by 33 percentto 73.7 million euros, group net profit rose by 28 percent to 46.8 millioneuros). Now the Finland Post is considering more takeovers to developnew business sectors to at least compensate for the falling turnover inthe letters sector. Through purchase of a controlling shareholding inNorth Euroway Oy in early October 2003, the post office expanded itsposition in short distance transport.Finland post also acquired the 50 percent it did not already own in ware-housing company Logia Oy while a logistics and internet consultancywas also taken over.

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5. The consequences for the European economy from distorted competition inthe forwarding and logistics market.

To achieve the rapid transfer of cargo, comprehensive supporting services,exchange of associated information between all areas, flexibly andaccording to customer wishes, the availability of efficient forwarders andlogistic service operators is required on the basis of private enterprises.This is essential for the entire European economy.

An enormous contribution is made to wealth and job creation by the for-warding and logistics sectors. In Germany the market volume is around150 billion euros, in France appr. 100 billion euros and in Benelux about80 billion euros. Alone in Germany, 2 million people have jobs connectedwith transport logistics. The monopolistic and concentration trendsdescribed means equal business opportunities and freedom of choicehave been partially lost. Reason is many successful private companieshave been taken over, while other private companies have been forcedout of business by the pricing policies and aggressive market pressurefrom partly-state owned and state owned companies.The transport and logistics industry has also been put under seriouspressure from the European integration process, generally stagnanteconomic growth and the unfair competition practices of partly-stateowned and state owned companies already described.

The attempts by partly-state owned and state owned companies to cementtheir monopolies have left clear tracks with the following consequences:

• Reduction of logistics services offering complete coverage of allareas, which could for example lead to an inferior service level for rural companies and populations.

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• Loss of diversified services as private sector niche operators arepushed out of the market as part of the concentration process.

• Destruction of transport networks built up by private companies(for example the Swedish forwarding company ASG, whoseEuropean network of partners was distroyed and operations weretaken over by Danzas, a subsidiary of Deutsche Post World Net.)

• Increasing transfer of privately-financed transport and logisticscompanies into sub-contractor status of large partly-state ownedand state owned companies.

• High price and cost pressure creates a danger to the safety andquality of transport and logistics services.

It can be fundamentally seen that the positive impacts sought throughliberalisation of transport markets – international, free competition – hasnot been achieved and because of the monopoly tendencies describedis put in question in future.

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6. Measures required to re-establish a situation with fair competition

The distortion of competition in Europe’s forwarding and logistics marketcaused by partly-state owned and state owned companies threatens thevery existence and future of the privately financed companies in thetransportation and logistics industry.

Goal of the EU and all authorities involved must be to prevent a furtherdistortion of competition to the benefit of partly-state owned and stateowned companies in the transport and logistics sector.

To stop this fatal development, the German (Wettbewerbsverein) andFrench (H.A.L.T.E.) associations for promotion of competition and fairtrade in the forwarding, logistic and transport sectors, as publishers ofthis white paper, request the following measures:

1. State support paid to state or semi-state companies in the rail andpostal industries, which are seeking to establish themselves in thetransport and logistics sectors, must remain an exception. But thismust also be subject to strict and permanent controls.

2. If state support or other assistance is paid to help with general eco-nomic development of such organisations, this may not be misusedfor other purposes, such as being directed towards expansion intotransport and logistics or building up such existing activities of semi-state owned and state owned companies. Such misuse should beforbidden and closely monitored.

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3.Use of revenues/profits from monopolies, state finance or statesupport for company takeovers or shareholding purchases in thetransport or logistics sectors must be closely controlled at nationaland European levels. Conditions for takeovers of or shareholdingpurchases in private companies by state owned organisations mustbe precisely laid down. Takeovers or shareholding purchases by semi-state owned and state owned companies should only be possiblewhen they take place under the same conditions under which priva-tely-financed transport and logistics companies would make suchtakeovers or shareholding purchases.

4.Equal opportunities between privately-financed transport andlogistics companies and semi-state owned and state owned com-panies must be restored. The previous practice by semi-state ownedand state owned companies of purchasing freight forwardingand logistics companies at excessively high prices or buying share-holdings at excessively high prices must be stopped if the financecomes from other sectors, such as from monopoly earnings. If neces-sary new legislative rules must be created to ensure fair competitionin this respect.

5. Takeovers of or shareholding purchases in freight forwarding andlogistics companies by semi-state owned and state owned compa-nies should fundamentally not be permitted if the semi-state ownedand state owned companies are making losses and can only risethe purchase price by using state loans, guarantees or using otherstate support.

6. Necessary consequences must be taken against the non-permitteduse of state support which has taken place against current EU law.The EU Commission should seek a rapid repayment of non-permittedstate support already paid out and ban further non-permittedsupport. Sanctions should be used when non-permitted statesupport is not repaid on time and when EU Commission guidelineson provision of state support are not obeyed.

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7.Responsibilities of the EU Commission’s general directorates fortransport, energy and competition must be better coordinated andconcentrated in respect of controls on state support, competitiondistortion and cartel investigations in the transport and logistics sectors.

8. The EU Commission and national governments are called upon toconsider much more strongly than before the enormous economicimportance of privately-financed transport and logistics companies.

9. The EU Commission and national governments are called upon to takeall action to ensure fair competition between semi-state owned andstate owned companies on one side and privately-financed transportand logistics companies on the other. Privately-financed companiesin this sector should be protected from unfair competition to enablethem to be in a position to dynamically develop European transportmarkets, to finance and implement technical innovations and tocreate cooperation alliances and competitive transport networks tomeet the requirements of the entire European economy.

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7. Index of sources used

A large number of up-to-date sources were used to research this whitepaper. They were taken from a series of differing archives and the Internet.The following list shows the comprehensiveness of the information used.

Deutsche Verkehrs-Zeitung, DVZ

• "Geodis on the way to be a global player”; DVZ from 8 April 2004

• "DB group reduces losses in 2003”; DVZ from 23 Mach 2004

• "Finnish Post makes ground in logistics – takeover in transport and warehousing sector”; DVZ from 16 March 2004

• "European express congress: How far is the liberalisation of the letters market?”; DVZ from 13 March 2004

• "GeoPost plays the international card – Acquisitions planned”; DVZ from 13 March 2004

• "Sweden: The Post remains a huge construction site”; DVZ from 11 March 2004

• "TPG plans to consolidate its logistics sector”; DVZ from 28 February 2004

• "Logistics firms close Continental gaps – More acquisitions and mergers in Europe”; DVZ from 24 February 2004

• "Commission stays on the ball with ABX – Background to subsidy investigation published." DVZ from 7 February 2004

• "Great Britain: Belgian post office wants to further expand in letters market”; DVZ from 9 December 2003

• "SNCF to stay in the rest for at least one year longer”; DVZ from 22 November 2003

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• "Company takeovers mostly cross border”; DVZ from 13 November 2003

• "On the surface route into the future – Deutsche Post combines express and logistics activities”; DVZ from 28 October 2003

• "Railion searches for new Partners”; DVZ from 20 September 2003

• "Parcel and express sector scoured by postal groups”;DVZ from 20 August 2003

• "Deutsche Post plans to enter pharmaceuticals deliveries as logistic provider”; DVZ from 19 August 2003

• "Deutsche Post increases profit forecast for 2003”;DVZ from 31 July 2003

• "EU opens investigation of ABX restructuring plan”;DVZ from 24 July 2003

• "Federal subsidies for railways at historic high level”;DVZ from 28 June 2003

• "Profits by 2008 - if the state helps SNCB”; DVZ from 11 June 2003

• "La Poste invests heavily”; DVZ from 24 April 2003

VerkehrsRundschau-E-Mail-Newsletter / TransportWeb

• "Deutsche Post doubles 2003 group profit”;VerkehrsRundschau-E-Mail-Newsletter from 10 March 2004

• "France's associations form joint pressure-group”;VerkehrsRundschau-E-Mail-Newsletter from 21 January 2004

• "Italian government subsidises railways”; VerkehrsRundschau-E-Mail-Newsletter from 22 December 2003

• "Radical cure for SNCF Fret”; VerkehrsRundschau-E-Mail-Newsletter vom 25 November 2003

• "Constitutional complaint against post monopoly fails”;VerkehrsRundschau-E-Mail-Newsletter from 13 November 2003

• "Auditors put La Poste strategy in doubt”;VerkehrsRundschau-E-Mail-Newsletter from 11 November 2003

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• "Fast 64 billion euros from federal funds for the rail network”; VerkehrsRundschau-E-Mail-Newsletter from 10 November 2003

• "New four year period plan for La Poste”; VerkehrsRundschau-E-Mail-Newsletter from 28 October 2003

• "Post plans to double profit margins in parcel business”;VerkehrsRundschau-E-Mail-Newsletter from 27 October 2003

• "DHL creates express network in China”; VerkehrsRundschau-E-Mail-Newsletter from 27 October 2003

• "Bahn plans to serve international cargo better with Stinnes”;VerkehrsRundschau-E-Mail-Newsletter from 5 September 2003

• "EU Commission stops ABX subsidies”; VerkehrsRundschau-E-Mail-Newsletter from 26 August 2003

• "EU investigation of ABX support”; VerkehrsRundschau-E-Mail-Newsletter from 25 July 2003

• "State support for ABX Logistics criticised – German competition association intervenes with EU Commission”;VerkehrsRundschau-E-Mail-Newsletter from 22 July 2003

• "EU rail investigation against Germany started”;VerkehrsRundschau-E-Mail-Newsletter from 18 July 2003

• "Schenker plans purchases in the USA and Asia”;VerkehrsRundschau-E-Mail-Newsletter from 15 July 2003

• "Crisis in French transport industry”; VerkehrsRundschau-E-Mail- Newsletter from 3 June 2003

• "UPS continues with complaint against Deutsche Post”;VerkehrsRundschau-E-Mail-Newsletter from 2 June 2003

• "Express sector rescues La Poste”; VerkehrsRundschau-E-Mail-Newsletter from 8 May 2003

• "Brussels investigates state support for SNCF subsidiary Sernam”;VerkehrsRundschau-E-Mail-Newsletter from 8 May 2003

VerkehrsRundschau

• "Express: La Poste expands network – Activities on the Bosporus and in South East Europe”; VerkehrsRundschau 9/2004

• "Forwarding: TPG plans to supplement its portfolio with forwarding business”; VerkehrsRundschau 9/2004

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• "Letter market: Lack of liberalisation – Experts demand more competition”; VerkehrsRundschau 5/2004

• "Questionnaire programme: Pampered children against whipping boys”;VerkehrsRundschau 50/2003

• "Brussels stops ABX subsidies”; VerkehrsRundschau 35/2003

• "ABX criticised: Competition association turns to EU”;VerkehrsRundschau 30/2003

• "Overshoots: Without good results from its express and package activities the French post office would have fallen into the red"; VerkehrsRundschau 19/2003

LOGISTIK inside

• Study: Outsourcing stamps 3PL scene"; LOGISTIK inside 16/2003

• "The new Stinnes AG”; LOGSTIK inside 15/2003

• "EU investigation threatens ABX”; LOGISTIK inside 14/2003

• "Post increases profit forecast”; LOGISTIK inside 14/2003

• "Bahn gets turnover explosion through Stinnes takeover”;LOGISTIK inside 14/2003

• "Schenker: The Stinnes subsidiary takes off”; LOGISTIK inside 11/2003

trans aktuell

• "DHL: The shining brand overshadows quite a few weak points”;trans aktuell 9/2004

• "The way to save - outsourcing: Deutsche Post awards 600 contracts to transport companies”; trans aktuell 15/2003

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Welt am Sonntag; Die Welt

• "Bahn has 26 billion in debts again”; Welt am Sonntag from 31 March 2004

• "The Post must purchase companies worldwide”;Die Welt from 8 November 2003

"Financial Times Deutschland"

• Diverse online reports about European postal and rail companies

Other publications

• "The Bahn becomes a global player: With the takeover of Stinnes AG and its subsidiary Schenker the DB transforms itself into a globally active logistics provider”; bahn-REPORT 2003

• "EU imposes fine on Deutsche Post”; berlinonline.de from 21 March 2001

• "DB Cargo no longer exists”; Internationales Verkehrswesen 10/2003

• "The Post makes the federal government poor”; FAZ am Sonntag from 6 July 2003

• "ABX finished without state aid?”; Internationale Transport-Zeitschrift 27-28/2003

Company sources

• Nachrichten-Börse, Information about the Deutsche Post AG share,Issues 2/2003, 3/2003 und 4/2003

• Themes – Service for press, radio and television: "Let’s go East”(Deutsche Post World Net),

• Presentation "Deutsche Post World Net: The new brand DHL”;Bonn, March 2003

• "The development of DHL 1969 - 2003”; Image leaflet from the Deutsche Post AG, 2003

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• Speech from Dr. Klaus Zumwinkel, chief executive officer of the Deutsche Post AG, 5 June 2003

• 2002 annual report Deutsche Post World Net AG• Diverse press releases from Deutsche Post World Net AG• 2002 annual report Deutsche Bahn AG• Diverse press releases from Deutsche Bahn AG

Further sources

• "Corporate strategies in the deregulated logistics market”;Presentation at the industry sector conference post and logisticssector by trade union ver.di, state section Baden-Württemberg,Stuttgart, 18 January 2003

• "The TOP 100 in logistics”; Deutscher Verkehrs-Verlag, Hamburg,2nd edition (1999) and 3rd edition (2003)

• "Mergers & Acquisitions: M&A transactions in the German transport and logistics sector 2002”; DZ BANK 2003

• "Transport & Logistics – Accelerated market consolidation and structural changes”; Finance analysis from Bayerische Landesbank, 2003

• "European Deal Survey 2002 Logistics – Mergers & Acquisitions in the Logistics Industry 2002”; Ernst & Young 2003

• "White paper: The European transport policy up to 2010: setting the course for the future”

• "The competitive situation for French transport and logistics companies in the EU”; Speech from Jean Schmitt, President-Director General GROUPE HEPPNER, 2003

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8. Imprint

Publishers:Verein zur Förderung des Wettbewerbsund lauteren Verhaltens imSpeditions-, Logistik- und Transportgewerbe e.V.Mehlemer Straße 13D - 50968 KölnTelefon: + 49 (0) 221 / 38 01 31Telefax: + 49 (0) 221 / 93 70 17 15

and

H.A.L.T.E.Honorable association detransporteurs et logisticienseuropéens46 Rue de BassanoF - 75008 ParisTelefon: + 33 (0) 1 55 63 23 - 09Telefax: + 33 (0) 1 55 63 23 - 15

Autor:Behrend OldenburgMail: [email protected] translation:

Layout:Ingeborg Schwarz

Hamburg, Köln, Paris, April 2004

Translation:n.n. (Englisch)n.n. (Französisch)

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Disclaimer:

This white paper serves as a position statement and list of measuresrequired by the publishers regarding the market conditions in theEuropean forwarding and logistics markets presented to European andnational authorities.The publishers and the author have taken and processed the informationsupporting this white paper from reliable sources in good faith. But noliability can be accepted for the completeness and correctness of thesources given.The publisher and author have taken every care in preparation of thiswhite paper but cannot accept any liability for any consequences to thecompanies referred to which could occur following the distribution anduse of this white paper.The information, conclusions and opinions reflect the time the whitepaper was prepared, so far as they are not given a specific time reference.

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